What Trump means for Texas

Big changes in trade, energy, immigration, and healthcare.

Published 8:15 am, Wednesday, November 9, 2016

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In the days before the Presidential election, it was pretty clear what the economy under a Hillary Clinton administration would mean for America: We're already living in it. The consequences of a Donald Trump administration, however, will be radically different.

In many respects, the change could look similar in Texas to what it looks like across the country, since the Lone Star state is increasingly tied to the national economy. The most fundamental impact, in the near term, will be a dramatic chilling in investment, since businesses have only the fuzziest ideas of what the new policy landscape will look like.

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But three issues that Trump made cornerstones of his campaign matter more here than in other places: Trade, immigration, and energy. We'll have much more to say as reactions come in throughout the day. Here's what we know already.

Trade: Borders matter again

One of the easiest, quickest things Trump could do is rip up our trade agreements — most immediately the North American Free Trade Agreement, which over the past two decades has created a trading union with Canada and Mexico. Those countries are now our second- and third-largest trading partners respectively, after China. Raising tariffs on imports, as Trump has proposed, would immediately raise the price of consumer goods such as cars and electronics.

That could have a strong negative impact on Mexican manufacturing — the peso plunged to a record low following the election news — and the Texas border towns that have benefited from the business of transporting goods to the rest of America. If foreign imports are curtailed, that would also negatively impact Houston's port, which drives a large chunk of the local economy.

Will manufacturing move back to the United States, as Trump has predicted? Maybe, some. But factory investments are necessarily long-term. It's unclear how long the Trump regime will last, and if domestic production isn't competitive on its own, it would just leave again if tariffs were repealed.

More likely, manufacturing would shift to Asia, where lots of factory infrastructure already exists, and labor costs are even lower. A Trump administration could impose tariffs on Asian countries as well, but would then risk retaliatory measures that would tank major U.S. exporting industries such as agriculture, machinery, cars, and pharmaceuticals.

Energy: Unfettered access, but is there demand?

A Trump administration is a surprisingly mixed bag for the energy industry, and therefore the Texas economy.

On the one hand, Trump has promised to rescind President Obama's environmental regulations, rubber-stamp pipelines, and throw open federal lands to drilling, which oil and gas companies would welcome. He will also likely torch the new Iran nuclear agreement, which could cut off a large new source of oil, potentially helping to buoy prices. Trump's main energy advisor is Harold Hamm, a billionaire independent oil producer who could well become the secretary of energy.

But it's pretty clear that regulatory restrictions on supply weren't holding the energy industry back anyway. Crude oil inventories are still high. A slow global economy has dulled appetite for fossil fuels, keeping the price below what it costs to profitably produce. That's why Ed Hirs, a fellow in energy economics at the University of Houston, thinks Trump's win won't matter much for oil and gas in the short term.

"With the huge capital hits that the industry has endured the last three years and the huge number of layoffs, just opening up these lands does not give the nation new supplies for years," Hirs wrote in an email. Offshore projects, for example, have been put off for economic reasons. "They are too expensive to do in this price environment."

Meanwhile, renewable energy — which has become increasingly important to Texas' economy, and is close to being cost competitive with fossil fuels in some instances — will see no encouragement in a Trump administration. Although Trump has said little about wind or solar, he has expressed a disbelief in the reality of global warming, dimming the prospects for any further tax credits or government-sponsored research into more efficient technology that could speed adoption on a mass scale.

Immigration: potential loss of an essential workforce

As we've written before, Trump's plan to deport immigrants living in the U.S. illegally would have a disastrous impact on Texas' economy. Few states depend more on immigrants, who work in industries ranging from agriculture to construction to landscaping to food service. Those jobs will not all be filled by out-of-work American citizens if Trump gets his way, although wages may rise slightly in low-skilled occupations as businesses desperately try to recruit staff to replace them.

Even if they're not rounded up and sent back over the border — Trump suggested in the latter stages of his campaign that he would focus on those who had committed crimes — immigrants could well decide to go back themselves. If living and working in the United States becomes more difficult, the promise of taking advantages of the opportunities America offers may not be enough to keep them here.

Everything else

It's hard to comprehend just how far-reaching the impact of this election could be. For healthcare: Tens of millions of people could lose their insurance, when the Affordable Care Act is repealed. For education: Trump has promised to redirect funding into private and charter schools end national educational standards, allowing communities to decide what their kids learn. For the distribution of income: Trump has proposed a national tax overhaul, not dissimilar to the one offered by Congressional Republicans, that would slash taxes on corporations and add trillions of dollars to the deficit.